Nigeria's banking system is expected to receive N2.858 trillion in fresh liquidity this week, according to the Financial Markets Dealers Association (FMDA). The influx will be driven largely by maturing Open Market Operations (OMO) bills, Treasury bill repayments and other primary-market redemptions. The FMDA projected OMO maturities of N2.067 trillion, while Treasury bills maturities are expected to contribute N392.792 billion. Federal Government of Nigeria (FGN) bond coupons are projected at N349.838 billion, with additional inflows from N42.872 billion in commercial paper maturities and N5.25 billion in corporate bond coupons. The FMDA also identified a potential N2.43 trillion Federation Account Allocation Committee (FAAC) disbursement to federal, state and local governments as another source of liquidity.
However, a significant drain on liquidity is expected from the Debt Management Office's N1.75 trillion FGN bond auction scheduled for October 19, involving the reopening of bonds maturing in February 2034, September 2036 and June 2038. This week's projected inflows follow a substantial increase in banking system liquidity in the previous week. According to FMDA, liquidity rose by 69.39 per cent week-on-week to N6.283 trillion from N3.709 trillion, driven largely by N2.409 trillion in OMO maturities, alongside N80.84 billion in Treasury bills maturities and N30.20 billion in other primary-market repayments. The DMO's N269.06 billion Treasury bills sale partially offset those inflows.
In the external sector, Nigeria's gross external reserves rose by 0.02 per cent week-on-week to $55.089 billion, reaching a fresh high since December 2008. Average Brent crude prices increased by 3.92 per cent week-on-week to $106.02 per barrel, supporting Nigeria's external position. In the foreign exchange market, the naira depreciated marginally by 0.06 per cent week-on-week to N1,332.31 per dollar at the Nigerian Foreign Exchange Market (NFEM), while the parallel market rate remained unchanged at N1,375 per dollar. NFEM interbank turnover rose by 14.08 per cent week-on-week to $1.08 billion.
Fixed-income market yields moved higher. Average FGN bond yields increased by 32 basis points to 16.43 per cent from 16.11 per cent in the preceding week. The two-year bond yield rose by 142 basis points to 17.50 per cent, while the seven-year yield increased by 61 basis points to 17.04 per cent. The 10-year bond yield rose by 46 basis points to 17.05 per cent, though the 30-year yield declined by 60 basis points to 14.60 per cent. Treasury bill yields also moved higher, with the average yield increasing by seven basis points to 18.23 per cent. The one-month and three-month yields rose by 79 basis points and 65 basis points to 18.83 per cent and 17.65 per cent, respectively, though the six-month yield declined by 101 basis points to 17.70 per cent.
At the October 14 primary market auction, the DMO allotted N269.06 billion against a reduced offer of N450 billion, down from N900 billion previously, rejecting the bulk of demand on the 364-day paper. Stop rates remained at 15.50 per cent for the 91-day bill and 15.80 per cent for the 182-day bill, while the 364-day rate rose by five basis points to 15.90 per cent. The FMDA described this development as a pause in the post-MPR rate-cutting momentum.